Thanks to Congress, most state marijuana businesses are still dealing in cash only. That needs to change.
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In a clash between the regulatory power of the
federal government and American principles of free enterprise and
states rights, the cannabis industry continues to struggle for access to
U.S. banks.
This despite the fact that for years now the market has
been wide open for legal recreational and medicinal marijuana sales in most of the country.
Many Republicans, like my former boss, retired congressman
Ron Paul, have embraced allowing states to make decisions on whether to
allow cannabis for adult use or medical purposes. The people of 36
states have now authorized some level of medical cannabis, and among
those, 11 and the District of Columbia have legalized adult use for
recreational purposes.
Unfortunately, the federal government still considers these
states to be outlaws, because the Controlled Substances Act (CSA)
continues to list cannabis as a Schedule 1 banned narcotic.
As lawmakers
on Capitol Hill push to decriminalize cannabis at the federal level, it
makes sense for Washington stand down and at a minimum allow legal
businesses to use banking services for cannabis-related purposes.
Why? At the end of 2018, legal cannabis was a $10.4 billion industry
in the United States and is projected to grow by billions this year.
Yet many businesses are forced to deal in cash only because most banks
are still skittish about crossing the feds and taking on
cannabis-related customers.
This forces businesses to stash huge sums of
receipts and denies them access to lines of credit, loans, and even
credit cards.
Congress is being urged to fully open up the banking system
so that these basic services can be available to what is a burgeoning
enterprise in most states. On February 13, the House Financial Services
Subcommittee on Consumer Protection and Financial Institutions held a hearing that brought the breadth of the problem into full view. It focused on the the Secure and Fair Enforcement of Banking Act of 2019 (the
SAFE ACT), a bipartisan bill sponsored by Congressmen Ed Perlmutter,
Denny Heck, Steve Stivers, and Warren Davidson, which would allow
state-authorized cannabis businesses to access banking services. This is
a reasonable first step towards ending the federal war on cannabis.
In his own testimony on behalf of the Independent Community Bankers of America, Gregory S. Deckard,
chairman, president, and CEO of the State Bank Northwest in Spokane,
said that “the current conflict between state and federal law has
created a cloud of legal uncertainty for community banks, inhibited
access to the banking system for cannabis-related businesses and created
a serious public safety concern.”
Deckard made the case that in his home state of Washington,
“while legal under state law, every cannabis business licensed in the
state of Washington is illegal under the federal Controlled Substances
Act, which puts cannabis in the same category as heroin and LSD.” He
noted that “as a financial institution, though chartered by the state of
Washington, I am regulated, supervised, and examined by the Federal
Deposit Insurance Corporation (FDIC)” and “other state-chartered
community banks are regulated by the Federal Reserve.” Therefore, he
said, “bankers fear they will be highly critical of loans to businesses
that are illegal under federal law.”
In 2013, the Obama-era “Cole Memo”
offered a tacit green light to banks to issue services if they complied
with guidance from the Department of Treasury. When Attorney General
Jeff Sessions rescinded the memo, that put banks on notice that the
guidance was not stable, and many stopped providing these services for
fear of putting their institutions in legal danger. The Independent
Bankers of America voiced support for the SAFE Banking Act of 2019 as a
way to remove legal and regulatory obstacles to cannabis banking.
As a libertarian, I support the full legalization of
cannabis and other drugs, yet I understand that Congress may have to
take baby steps to get there. And at least with cannabis, states have
been taking real action towards legalization in the face of a federal
ban. Former representative Dana Rohrabacher led the fight for years to
stop the federal government from prosecuting states that have allowed
medical cannabis, and his funding rider is still law today. It makes
sense for Congress to take the next step and allow banking for legally
organized cannabis-related businesses in states that have allowed it.
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